“I’m putting down 10% to buy a home and my loan person said I have to pay mortgage insurance, but didn’t explain what that is. What exactly is mortgage insurance?”
Answer:
It’s insurance covering your lender against future losses from a foreclosure. Often called PMI or Private Mortgage Insurance, it is typically required on loans with a “loan-to-value” or “LTV” above 80%.
For example, if you buy a home for $100,000 and put down $15,000 for a loan of $85,000, your LTV is 85%. So you’d need mortgage insurance.
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